Discovery Framework

The core, underlying question of the above framework is this: How can we move the disadvantaged (both individuals and micro-enterprises) along a path of increasing participation in the formal economy? For individuals, that means banking the unbanked, extending access to loans to start small businesses, providing the means to get a foothold in commerce—both as a consumer and a producer. Next, the task is to help those craft enterprises, solo entrepreneurs and small businesses scale and thrive. Ideally, that happens in a way such that the profits and abundance is reinvested into local communities. These are not small or simple challenges.

This framework attempts to distill the patterns of success that leading innovators have invented to address this core question, so that the underlying principles can serve as guiding design principles future solutions.

While the needs of individuals and businesses might seem disparate at a first glance, we have considered them together, noting that often, similar strategies can be used to overcome the barriers that prevent both groups from moving along this path of increased participation. This innovation framework is a snapshot of solutions from around the world that apply creative approaches to providing financial solutions for all. They encompass both not-for-profit, as well as market-driven, profitable solutions.

Barriers:

These are core components we identify of a problem that, if changed, could allow for a true shift in paradigm and behavior. Barriers are not market conditions or underlying causes that merely describe a situation. They must be moveable and specific to the problem.

• Non-affluent are not valued customers: Financial institutions and businesses have not traditionally seen the poor as a profitable or viable market. Banks did not believe the poor would pay back loans. Companies did not believe that margins on any products sold to the poor could result in profit. As a result, few products and services have historically been designed for the poor and their unique consumption patterns and barriers. Both of these assumptions have be ultimately proven to be false, insights which have spawned the fields of microfinance and so-called “base of the pyramid” initiatives.

• Lack of access to markets or products: For both low-income individuals and businesses owned by micro entrepreneurs, access to banking services and financial markets is an ongoing issue. Individuals often lack geographic access to banking services; the rural poor are particularly overlooked and “undesirable” to traditional banks, particularly because their incomes can rest solely on agricultural cycles, which are seen as unreliable. Small businesses that serve the poor, which often operate as informal economy businesses without official documentation, lack direct access to the markets into which they sell, a fact that often costs them much in “middle man” fees. They also are removed from supply chains that would allow them to scale, be more flexible in their offerings and grow beyond a hyper-local focus.

• Social benefit businesses not deemed investment worthy: For businesses that serve the poor, many of which originate in the communities they serve, there is a belief that producing a social benefit (and by serving an undesirable clientele) precludes them from becoming hugely profitable, or worth the investment of a returns-minded investor. As the non-profit sector is more traditionally geared to charity (particularly prior to the microfinance wave) these businesses languish in a grey zone, unattractive to capital markets on either side of the profit divide.

• Lack of skills and incentives to join formal economy: Both people and businesses lack the basic skills and motivations to participate in the local economy. For unbanked individuals, literacy can be a key barrier, along with basic unfamiliarity with how financial instruments work or what benefit they might provide. Almost all investments are also geared toward a return or pay-off that is down the road, which, to people living in a day-to-day subsistence mode, is impossible to contemplate or justify. Businesses often lack basic bookkeeping skills and the documentation to allow them to take out loans to expand or improve their offerings.

Design Principles:

These are insights we distill from the work of leading social innovators. They do not encompass tools (such as technology or education), nor do they name specific organization-level approaches. They are clarifying insights that identify levers of change.

• Leverage the stake individuals have in financial success of the group: As microfinance has proven through its innovation of lending circles in which each person is accountable for the debts of others, there is value in setting up structures that tie incentives to group success. Many entrepreneurs are finding ways to vest individuals and businesses in their communities by aggregating their demand locally. Others take a “do-it-yourself banking” approach, asking the lending circle to provide its own funds for a loan or investment pool.

• Prove that social return doesn’t preclude financial gain: This strategy has worked both in terms of drawing individuals to an investment vehicle (like Kiva.org) as well as from the perspective of persuading institutions that social return is not the only value involved in for-benefit companies. Coupling real financial return to lending to the poor, through micocredit and other vehicles, has allowed the amount of money being poured into the cause of relieving poverty to expand exponentially. Finding ways to leash market-solutions to social causes is pivotal to scale and sustainability.

• Lower the entry threshold: Simply addressing the entry point barriers to services and participation is key. Removing geographic barriers by allowing mobile phone access or “doorstep service” is one form this innovation takes. Others include eliminating traditional financial barriers, such as collateral requirements, minimum balance thresholds, etc.

• Turn hidden value into alternative markets: Many innovators have found ways to assign value to previously unmonetized assets to drive a new form of commerce, or spur participation in the established economy. Residents in squatter villages located on prized city property can be compensated by developers for their occupancy to pave the way for re-location and re-development. Communities can strike agreements to honor units of time, invented currency or units of labor to stimulate commerce. In the case of Root Capital, Ashoka Fellow Willy Foote uses contracts from large corporations to purchase future corps of coffee farmers as collateral for loans to these mid-sized businesses.

• Aggregate demand or supply to influence market: One poor consumer or one small business is too small of a voice to sway markets. Aggregated, this voice is louder and hugely powerful. In South Africa, aggregating the buying power of shanty town minimarts – and their reach to consumers – is allowing them to scale as a cooperative “chain” of sorts. Sites like Prosper.com aggregate the needs of borrowers to allow an ebay-type market for person-to-person loans.

• Shorten timeline on individual “returns”: One of the primary hindrances for the poor in participating in the formal economy is that any benefit from decisions that take the long term into account invariably hamper their ability to survive in the now. Programs that shorten the timeline on that payback, whether it is an immediate credit to be used for health insurance, or a cash payment to reward the decision to keep a child in school rather than employ him on a farm, all provide some opportunity for longer term planning and investment.

  
  

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  Short Descriptions of Mosaic Cases

  Kapilananda Mondal (Ashoka Fellow 2002, India): Kapilananda Mondal has demonstrated that with the right incentives, rural individuals from all income levels can become regular savers and viable borrowers. His idea is to provide safe and convenient savings and loan opportunities for poor and low-income households and businesses in rural areas. Rather than relying on grants or any kind of external financing, rural areas can generate needed investment capital from within their own communities. For rural microbanking to work, Mondal sees that saving needs to be habitual. Incentives like cash prizes and travel awards can be creatively used to encourage this behavior. Conventional banking-related products such as insurance can and should be marketed as services to rural banking customers, regardless of income level. Mondal’s system includes “doorstep” service—an infrastructure of field staff to collect payments and disburse loans at the client’s doorstep—to make it easier for rural villagers to save. In addition to helping people replicate his idea, Mondal is expanding his current operations to 250 villages over the next five years.

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  The Grameen Bank: is based on the voluntary formation of small groups of five people to provide mutual, morally binding group guarantees in lieu of the collateral required by conventional banks. The assumption is that if individual borrowers are given access to credit, they will be able to identify and engage in viable income-generating activities - simple processing such as paddy husking, lime-making, manufacturing such as pottery, weaving, and garment sewing, storage and marketing and transport services. Women were initially given equal access to the schemes, and proved not only reliable borrowers but astute entrepreneurs. As a result, they have raised their status, lessened their dependency on their husbands and improved their homes and the nutritional standards of their children. Today over 90 percent of borrowers are women. From fewer than 15,000 borrowers in 1980, today the membership has grown to more than 2.34 million members (2.24 million of them women) in 38,957 villages. Group savings have reached 7,853 million taka (approximately USD 162 million).

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  John De Wit (Ashoka Fellow 2006, South Africa): De Wit has adapted ideas associated with microcredit to the needs of small-business men and women in rural South Africa. The Small Enterprise Foundation uses a group-based methodology adapted to the traditional rotating savings associations prevalent in South Africa called “magodisano” or “umgalelo” to provide rural micro-entrepreneurs with access to credit. The Foundation will demonstrate a new model of group-based savings and loans that is responsive to the largest problem facing micro-enterprise programs everywhere: expansion. A small business operator who requires a loan for his or her business initially invites four other people to form a group or “stokvel”; all of these people operate small enterprises and want loans for their businesses. The group begins to hold weekly meetings, first participating in three induction and training sessions. After successfully completing the training, all of the group members may obtain loans.

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  VirginMoney US: Originally launched as CircleLending, this service, aquired by Richard Branson’s Virgin, formalizes and manages loans between family and friends. The service allows individuals to pick their own interest rate and loan terms, with those interest payments accruing to the loaning friend or family member.

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  Jarek Dominiak (Ashoka Fellow 2001, Poland): To steer people through the economic transition underway in Poland and to give them the information and tools they need to support a market economy, Dominiak teaches people about financial systems and management. Based in Wroclaw, his investors’ association stimulates the growth of small investors’ clubs throughout Poland that bring together people who want to know more about the new economy and their role in it. Initially, participants contribute a small sum of money to the club pool. Then, by joining their contributions and working together to pursue smart investment opportunities, they gain confidence through hands-on techniques and learn concepts that apply to the national economy as well as their individual households. By making joint investment decisions, club members

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  Jean Claude Rodriguez-Ferrera (Ashoka Fellow 2006, Spain): Rodriguez- Ferrera is creating self-managed finance groups throughout the country. Each group of 30 carries out its own small saving and loan programs. The groups are called Self- Managed Financial Communities (CAFs). Although they share a common methodology and network, each agrees on its own rules of operation and coordinates is own activities. Besides providing access to credit, the CAFs encourage saving money. To join a group, each member is required to initially buy a number of “stocks” in the group; the amount purchased determines his or her capacity for credit. This capital allows each member to request small loans for which they pay a certain amount of interest determined by the group. The interest paid by the members who request loans provide a profit for the other members of the community.

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  Salomón Raydan (Ashoka Fellow 2000, Venezuela): Raydan’s community banks, or Bankomunales, are designed on a new savings and credit model by which community members provide the capital for their own loans through the purchase of shares, on which they earn returns. The banks are managed by the shareholding community members. These members determine interest rates, time periods for loan repayment, maximum loan amounts, repercussions for late payments, and all other standards for the banks’ operations. As a bank matures, the members have the option of soliciting outside funds, using their own capital as a guarantee. Outside funds, however, are never to amount to greater than 50 percent of the bank’s funds, so that the control always remains in the hands of the communities themselves.

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  Kiva.org: Kiva is the world’s first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs in the developing world. Kiva partners with existing expert microfinance institutions with access to outstanding entrepreneurs from impoverished communities world-wide. Kiva’s partners then upload their entrepreneur profiles directly to the site so individuals may lend to them. Kiva provides a data-rich, transparent lending platform, creating an interpersonal connection between lender and borrower, at much lower overhead costs due to the instant, inexpensive nature of internet delivery. The individuals featured on Kiva’s website are real people and entrepreneurs who need loans and are waiting for socially-minded individuals to lend them money.

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  Chittenden Bank: Vermont bank’s Socially Responsible Banking program gives its non-commercial customers the opportunity to be social investors. Customers can choose to deposit money into an account that gives them a lower-than-market interest rate so that the bank can offer lower interest rate loans to small family farms, conservation groups, and educational institutions. The customer gets a say in where that money goes, enabling the community to support the things that are most important to them.

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  responsAbility: ResponsAbility’s vision is a world in which developing countries are no longer considered as mere aid-recipients but as high-potential economies with a thriving and diverse entrepreneurial base, strongly supported by innovative microentreprises and Small and Medium Enterprises (SMEs). ResponsAbility bridges the gap by offering adequate financial services and new financial products for institutional and private investors to bridge the gap between the financial and development cooperation markets. ResponsAbility is a private sector initiative with partners that represent the main segments of the Swiss financial market - Credit Suisse, Raiffeisenbanken, Baumann & Cie Banquiers, Alternative Bank ABS - and the Andromeda Fund, a Social Venture Capital Fund.

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  Triodos Bank: Triodos Bank is a leading values-driven bank in Europe. Established in 1980, the bank has pioneered a radical, commercially successful approach to money that value people and planet, as well as profit. Since 1994 Triodos Bank has contributed its unique expertise in sustainable and transparent banking to the microfinance sector worldwide, through management of different specialized microfinance investment funds. The rationale behind the decision to take up this role was a strong desire to contribute to a better sustainable world through positive action and from a banking competence. In total the Triodos microfinance funds have provided finance to about 80 microfinance institutions, working in 35 countries. The funds are shareholder in 18 prominent microfinance institutions. As of June 2008, the total assets under management in microfinance amounted to EUR 140 million. Triodos also manages funds that invest in renewable energy and fair trade in developing countries.

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  John Sage (Ashoka Fellow 2006, USA): Sage’s Pura Vida is a test case creating good by using capitalism to empower producers, motivate consumers, inspire business leaders, and serve the poor. Pura Vida Partners, a 501(c)(3) nonprofit organization, launched PuraVida as a wholly-owned fair trade, organic beverage company. Like other fair trade companies, PuraVida targets consumers who want to buy products consistent with their social values, and ensures that producers of its coffee are paid a rate that empowers, rather than exploits. Unlike other such social enterprises, PuraVida operates the nonprofit and the for-profit as a “blended” organization. The staff, messaging, social benefit, and fund raising elements of PuraVida Partners are blended so closely with PuraVida that the company’s growth also provides unrestricted capital to the social benefit organization. His blended bond gave investors a way to make a 6 percent return on their investment that was in-turn donated to a nonprofit of their choice—most often Pura Vida Partners, which funds community development and education projects in Costa Rica, Nicaragua and is expanding into other producing countries such as Ethiopia and Indonesia.

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  Alou Keita (Ashoka Fellow 2006, Mali): Keita has created one of the most successful of Mali’s community managed village banking networks, providing savings, credit and banking facilities for village communities. Unique among other village finance offices, the input of capital from migrant workers in France allows the banks to strengthen villages which have been weakened by emigration and the ripple effects of rural poverty. One of Keita’s key innovations is a money transfer service for those living abroad which offers an effective response to the challenge of sending money home to remote villages.
  
  Keita’s village banks (officially known as village finance offices or “caisses”) differ from many other microfinance establishments. They are the only financial institutions in the region of Kayes, Mali, that are completely managed by villagers and do not require a minimum amount of savings in order to qualify for credit.

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  Wizzit: There are a wide variety of facilities operating in the mobile banking space, but Wizzit distinguishes itself from competitors by not requiring its customers to have a bank account in order to use it. Wizzit also sets itself apart by being compatible with many early-generation cell phones, including pay-as-you-go phones, frequently used by low-income residents. Account holders are issued debit cards that can be used at any ATM or retailer. The company employs more than 800 younger people who are often unemployed college graduates to help new customers open accounts. One of the company’s specific targets is to reach the 16 million under- and un-banked South Africans who make up the majority of the population there. Increasing the flexibility of mobile banking enables more people to participate and offers the potential for increased income.

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  Caixa Eeconoica: This organization works by banking the unbanked quickly and efficiently through retail partnerships. In Brazil, millions of unbanked residents have been given affordable, easy access to financial tools through a widespread banking correspondent network. The second largest bank in the country, Caixa Econômica Federal (CEF), formed a partnership with a national chain of lottery shops Casas Lotéricas. The partnership was originally formed out of necessity—the federal government had tapped the bank to distribute social benefits across the country; the lottery houses were given special permission to offer services on CEF’s behalf as banking correspondents. Residents 16 and older need proof of residence, their tax number, and an ID to open an account. More than half of all invoices for public utilities in the country are paid at these lottery houses. Most government social benefit program payments are made to residents on magnetic cards that they can use at the kiosks. Other banks in the country have formed successful correspondent banking partnerships with pharmacies, grocery stores, and retailers.

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  Tio Networks: TIO Networks Corp. is a startup financial services company that powers the “Walk Up Financial Services” marketplace with thousands of leading edge automated self-service and clerk assisted solutions. TIO owns the largest and most convenient national network of cash accepting ATMs for bill payment and prepaid services for the ‘cash preferred’ consumer marketplace in North America. TIO symbolizes fast, convenient, safe and secure access to key financial services. All transactions are done on kiosks, reducing costs and removing any social hesitation that might be involved in visiting a bank branch.

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  Lílian Do Prado Silva (Ashoka Fellow 2007, Brazil): Silva supports youth entrepreneurship in the field of organic family agriculture, offering access to credit and formal guidance in the implementation of businesses. Her strategy of requiring no collateral helps young people build on their agricultural heritage and contributes to economic stability in the community, which loses fewer young people to urban centers for jobs.

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  Joseph Sekiku (Ashoka Fellow 2007, Kenya): By educating small farmers about production chains and larger markets for their produce, Sekiku gives them new opportunities to increase their profits and improve their livelihoods. He also equips them with the tools to take advantage of these opportunities, teaching them the basic entrepreneurial skills to turn surplus into quality products. These include use of new technologies such as fruit driers and processors that lengthen the shelf life of perishable farm products, enabling farmers to sell products when the market is good. Finally, Sekiku opens access to new markets by linking farmers to Tanzanian and international markets through a partnership with Ashoka Fellow Adrian Mukhebi’s Kenyan Agricultural Commodities Exchange.

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  Aysha Saifuddin (Ashoka Fellow 2007, Pakistan): Saifuddin formed Kaarvan, a shareholder company, to strengthen women producers’ economic power by improving their product quality and diversity. Kaarvan then connects producers with a distribution network of retail outlets selling to local high-end markets. Saifuddin is currently linking international companies with production houses as possible outsource centers and has plans to enter into the vibrant cotton sector.

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  Winnie Lira (Ashoka Fellow 2002, Chile): Letelier recognized that demand for original, top-quality products was growing as Chilean consumers are presented with more consumer options. Microsized businesses were unable to compete with large companies and have traditionally suffered from formal barriers like complicated paperwork and licensing. These obstacles have had the greatest effect on women entrepreneurs, whose products are generally considered to be low in quality and appeal. Winnie encouraged poor women to tap into increasingly sophisticated markets by organizing the women, then training them both to identify new work opportunities and to create competitive advantages for themselves. She emphasizes product value, market penetration, income-generation strategies, and access to government contracts.

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  Central Coast Local Exchange Trading System: In an area of New South Wales, Central Coast created a new form of currency that can be used in parallel with the national currency. The local currency, called Shells, is one kind of Local Exchange Trading System or Local Energy Trading System (LETS). The idea behind LETS is to promote self-sufficiency in a community by tapping into residents’ energy, skills, and time instead of their financial wealth. There are various LETS systems throughout the world. In this particular system, first-time traders can start without Shells on the assumption that they will earn them, encouraging participation. From issues associate with rapid development, Central Coast has experienced disputes over the water supply, and high unemployment. Shells allow people who are unemployed to gain access to goods and services they might not otherwise be able to afford, and in the process fosters community development.

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  Moussa Kane (Ashoka Fellow 1998, Mali): Kane has organized Mali’s informal economy into a formal association that compiles data on the informal sector and provides basic services to impoverished entrepreneurs. The association provides startup equipment and in-kind loans to entrepreneurs and offers business and financial training to help small ventures succeed. His organization is the first company of its kind in Mali to be owned by its dues-paying members, and it is financed and run entirely by members of the informal sector.

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  Darin Gueneskera (Ashoka Fellow 2003, Asia): Gueneskera started a stock exchange market, a variation of modern stock exchanges, by which the poorest—the inner city slum and shanty dwellers—can value or trade their main item of wealth. Gueneskera started by persuading the government and other development organizations to play a new role. He persuades and trains welfare officers to become marketing personnel who promote his idea to the poor. He then sells their real estate and purchases for them new, modern apartments of their preference. The government’s role then changes to that of monitoring a market economy - ensuring transparency and regulating new development plans for neighborhoods inclusive of the poor, approving the establishment of land and real estate trusts, and registering ownership titles to homes.
  
  The program creates for slum dwellers a transferable asset in the land they occupy and which they transfer to a trust. In exchange, they receive entitlement certificates to purchase an apartment in a new building. These certificates are a vote for the building of their choice. They are redeemed by exchange for title to a condominium apartment in the new building. They also own a share of the common areas that may include commercial shops, a preschool, and more. Accordingly, they become stakeholders in urban regeneration.

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  Willy Foote (Ashoka Fellow 2007, USA): Foote is transforming lending to the rural poor by making loans based on producers’ future sales rather than their existing assets, thereby redefining risk assessment to value emerging ethical supply chain relationships. This shift makes them bankable and proves the business case that rural communities are profitable investment opportunities for mainstream financial institutions. Through his US-based organization, Root Capital, Foote is getting his lending methodology adopted by local and global banks. Root Capital expects to break even with $40 million under management in 2009. This level of profitable lending activity will effectively define a new asset class capable of exploiting the growing market for fair trade and green goods specifically to counter rural poverty. In addition, Root Capital is helping to bridge the gap that currently exists between microfinance and large scale banks.

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  Joaquim De Melo (Ashoka Fellow 2004, Brazil): After years of working on projects to improve life in the favelas, de Melo began innovating within the finance sector and has developed a new banking model that works both socially and financially. He launched the People’s Bank, which feeds the network of local solidarity with a parallel currency, facilitating the sale of products made in the community, making incomes circulate within the neighborhood, and thereby promoting economic growth. Armed with a detailed map of local production and consumption, de Melo offers lines of microcredit for those wishing to produce to meet local demand and another line that finances those who wish to purchase from local producers and merchants. The goal of the strategy is to create a sustainable and virtuous local economic circle, as well as to prepare this excluded population for life in the wider capitalist world.

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  Celso Grecco (Ashoka Fellow 2006, Brazil): Grecco harnesses the structure of existing financial markets to generate new avenues for social financial investment. Celso has created a Bolsa de Valores Sociais (BVS), or Social Stock Market, that operates within Brazil’s largest stock exchange, Bovespa. Celso offers investors a portfolio of certified, credible social investment opportunities. Investors measure their return in social impact, holding citizen organizations (COs) accountable through regular progress reports. All 30 organizations initially posted for investment have been fully funded, representing US$2.2 million.

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  Marcelo Mario Caldano (Ashoka Fellow 2003, Argentina): Caldano’s plan relies on a new kind of currency to build and sustain schools, public institutions, and citizen sector organizations. Rather than paying cash to support their school, participating members contribute work hours–which are calibrated to an average wage–and work together to deliver services. In turn, classrooms get swept, electrical wiring gets installed, school lunches get prepared and served, administrative and clerical tasks are completed, curricula get written–and most importantly, children get an education. Private businesses also pay into the system through donations of equipment and services that families can then buy.
  
  Cadano’s idea not only provides the needed resources, but also initiates an important mindset shift: value is ascribed to the nonfinancial contributions of each member. The results are dramatic. In one community where 80 percent of the population is too poor to participate in the formal economic system, Caldano’s system has resulted in a self-sustaining school that serves one-third more students. The community is busy supporting the school and developing plans for other services as well. Having demonstrated the success of his approach, Caldano is working to introduce the model in communities throughout the country and apply the concept to other areas of social need.

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  Felipe Vergara (Ashoka Fellow 2006, Colombia): Vergara is applying a simple principle to the field of education finance: profit attracts capital. Through Lumni, Felipe is managing the first profitable education investment funds, and in the process is testing, refining, and demonstrating the tools that other groups will need to do the same.
  
  The cornerstone of Vergara’s innovation, the “human capital contract”, eliminates the risks to both students and investors that otherwise deter private investment. In exchange for education financing, these legally binding agreements require students to pay a fixed percentage of their income over a pre-determined number of months after graduation. For students, human capital contracts do away with both the need for collateral and the threat of burdensome debt associated with traditional loans. The effect makes unemployment and underemployment less ominous, but also

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  Timebanks.org: TimeBanks’ mission is to expand on a movement that reforms economic and social systems, policies and practices so that they empower human beings to contribute to each other’s well-being through reciprocity. Like other alternative currency systems, the Time Dollar maximizes the exchange of skills and services in a community. Communities that use Time Dollars rely on localized Time Banks to keep track of hours one spent and hours one has available to spend. Timebanks.org offers tools and advice to make the system easier for communities to implement, ensuring more success.

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  Timothy Jenkin (Ashoka Fellow 2007, South Africa: Jenkin gives marginalized South African citizens, excluded from the formal economy, a functioning economic system of their own. He has successfully adapted to South Africa an alternative currency scheme based on the value stored by users, rather than commodities (like gold or silver). Jenkin’s online platform, the Community Exchange System (CES), allows township residents to purchase and sell goods as well as accumulate savings and access other banking services. By computerizing transactions and having users maintain their own accounts through computer kiosks or cell phones, Jenkin reduces administrative costs. Unlike most alternative currency regimes that have limited capacity to spread, CES’s online technology infrastructure gives it the potential for promotion in all segments of South African society, reconciliation with government tax systems, and eventual adoption by currency schemes worldwide.

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  Douglas Racionzer (Ashoka Fellow 2004, South Africa): Racionzer established Emerging Market Services (EMS). As a larger operation with more buying power, EMS is able to negotiate bulk discounts with food companies like Nestle that usually deal only with large supermarkets, and secure contracts with advertisers to place colorful signs on shop walls that bring in revenue and help legitimize the shops as real businesses. When meeting with suppliers and advertisers, Racionzer emphasizes that the market footprint is not a single township or small collective, but nearly three million people in the 24 townships where EMS now works.

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  Prosper: America’s largest people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone. The way Prosper works is intuitive to people who have used an online auction. Instead of listing and bidding on items, people list and bid on loans using Prosper’s online auction platform. People who register as Prosper lenders set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select.
  
  In addition to criteria commonly used by institutional lenders, such as credit scores and histories, Prosper lenders can consider borrowers’ personal stories, endorsements from friends, and group affiliations. Borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Then the auction begins as Prosper lenders can bid down the interest rate. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan to the borrower. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrower and lenders. Prosper generates revenue by collecting a one-time 1% to 3% fee on funded loans from borrowers, and assessing a 1% per annum loan servicing fee to lenders. Backed by Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital Partners, and Omidyar Network, Prosper has raised $40 million.

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  Bruce Cahan (Ashoka Fellow 2007, USA): One of the biggest problems plaguing the social sector worldwide is the lack of recognition and measurement of social benefit. Bruce Cahan’s work on “Sustainable Resiliency” (SR) creates a coherent framework for the identification, measurement, and valuation (monetization) of social benefit and social externalities. His SR bank measures the ability of a region or city to cope with change, looking at different areas of social concern from global warming to disaster preparedness. The bank translates this measure into monetary terms, giving the financial services industry a practical tool for understanding how investing in sustainability and resiliency is good for business. Cahan has worked with the City of New York where he successfully lowered the municipality’s borrowing rate. Together, his SR Bank, a broad set of partnerships, and investment in geospatial technology allow Cahan to begin shifting the way debt and capital markets value investment in long-term social benefit.

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  Vineet Rai (Ashoka Fellow 2006, India): Rai is working to create a sustainable change in rural India through the provision of venture capital financing and management support to socially-conscious, environmentally friendly, commercially viable ventures that currently have limited or no access to established financial institutions. Rai scouts rural innovations and appropriate technologies that can be leveraged to create viable and sustainable micro enterprises—which in turn spurs economic activity, creates jobs and improves quality of life in rural India. He establishes close partnerships with rural incubators, citizen organizations and government agencies working in the rural sector. He invests in these incubators and provides financing to support the commercial scaling-up of rural ventures and appropriate technologies with potential for replication throughout rural India.

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  Maria Christina Zepeda Porres (Ashoka Fellow 2001, Mexico): Porres’ organization, Siembra, selects women in a village, each of whom already weaves high quality carpets to sell on the local market. With a loan from Siembra, these individual entrepreneurs join forces to create a larger, more productive and efficient enterprise. Siembra provides management training, and links the factory to large buyers, such as stores in Mexico City. The factory makes it easier for women to establish a brand name and reputation, and to secure ongoing contracts. Because the factory is a cooperative, every worker is an owner. Siembra promotes a savings program called GEMS (Groups of Entrepreneurs Saving Money),where each member must put money in the bank, saving as much or as little as she wants. By putting aside something every month, women increase their power in the family and status in society.

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  José Días (Ashoka Fellow 2007, Brazil): Días is helping small rural communities in Northeastern Brazil to survive seasonal droughts by developing communal lending pools that loan directly to individual farmers. The loans, made through his organization, Center of Popular Education and Syndical Training (CEPFS) are used for installing cisterns and other water conservation technologies.

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  Fidela Ebuk (Ashoka Fellow 1993, Nigeria): Since the 1980s, microcredit explosion throughout the developing world, many have worked to scale up widespread African traditional local savings associations with mixed results. Ebuk has developed an original and effective approach that scales up women’s savings through small-scale business credit, but with a distinctive twist. Ebuk’s savings and credit projects are geared heavily toward promoting community health. This health orientation anchors two fundamental dynamics of her approach. First, it provides the vision that unites the women around a community-wide objective (as distinct from the individual objective) at the core of the traditional savings group. Second, it contains a number of specific economic activities such as health insurance and bulk medicine purchasing that provide tangible benefits to individual members and communities almost immediately.

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  Pradeep Ghosh (Ashoka Fellow 2004, India): While social security is nothing new, Ghosh is making it available for the first time to India’s most impoverished communities. Ghosh’s innovative system capitalizes on the collective bargaining power of communities, and therefore provides financial security for individuals without the financial burdens that traditional social security models require (such as taxes or spending cuts). Indian communities negotiate agreements with essential service providers whereby in exchange for a large and regular client base, vendors/providers offer a discount on their goods and services. The amount discounted feeds into a savings account and pays for premiums on health and life insurance and other safety nets. The model thus enables the poor to utilize one of their greatest assets: the collective strength of community; and provides them with a (financially) painless mechanism to participate actively in protecting themselves against eventualities.

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  Chandra Ghosh (Ashoka Fellow, 2007, India): In response to India’s great microfinance boom failing to include the “poorest of the poor” in its poverty alleviation programs, Ghosh’s ‘trickle-up’ program is aimed at graduating the poorest to regular microfinance first and then, to formal financial programs. To help them make the transition smoothly and manage their debt successfully, Ghosh has incorporated support services addressing crucial needs like health, education, business training, and insurance in his much-below-the-poverty-line financial services program. Tested and refined two years ago with 25 destitute women, the pilot succeeded in helping these women create sustainable livelihoods and reach income levels of Rs 2000 per month from the earlier Rs 300. Ghosh operates through the internationally recognized microfinance institution Bandhan, with 343 branches covering about 10,000 villages and a client base of nearly 600,000 members.

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  Opportunity NYC: This pilot “conditional cash transfer” program is a collaboration among New York City government, the Rockefeller Foundation, The Starr Foundation, The Robin Hood Foundation, the Open Society Institute, and AIG. This is the first CCT program in the United States. The program works by giving the poorest New Yorkers money every time they make responsible choices. It rewards people for a modest list of behaviors, such as children with good attendance and families that get annual health checkups. The idea is to alleviate difficult choices faced by the working poor, such as the choice between making a doctor’s appointment and getting paid for a two-hour shift.
  
  Eligible applicants are entered into a lottery to be chosen since this is just a pilot. They must show proof of citizenship and other things, like marriage, school enrollment, attendance, grades, health care, etc., depending on what good behavior the family is planning to be paid for. This program does not affect a family’s welfare status/payments if they currently receive them. The project is in its infancy, but 1,431 families received their first cash transfers for completing specific activities. Families earned an average of $524, for a total of $740,000, in the program.

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